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Online TV takes off, slowly

Online television service Sling TV’s release early last year was supposed to ignite a new era of alternatives to costly cable and satellite TV services.

Eighteen months later, Sling TV has attracted less than 1 million subscribers, by most estimates. The service is “hitting a wall,” Craig Moffet, an industry analyst at MoffettNathanson, wrote last week.

And yet, if online television seems to be growing slowly, its future still seems bright. The concept is simple: People may not want to watch, or pay for, the dizzying array of cable or satellite channels that conventional television packages offer. Instead, with Sling TV, they can pay a minimum of $20 a month to watch ESPN, CNN, TBS, Food Network and other popular cable channels online — on computers, phones and tablets, as well as on an Internet-connected TV. A rival service, Sony’s PlayStation Vue of San Mateo, began last year and is expanding nationwide. YouTube and Hulu are reportedly planning to create services that offer bundled TV channels.

“It’s more like a momentary slowdown,” said Evan Neufeld of research firm L2. “The tide is coming. But you’ve got to crawl before you can run.”

Satellite TV company Dish Network started Sling TV in February 2015, mainly to attract viewers who were not subscribing to any satellite or cable TV service. But Sling TV was also Dish’s acknowledgment that the habits of viewers, especially younger ones, were shifting toward online sources like Netflix, YouTube and Amazon Prime.

The industry refers to those viewers who are leaving pay TV services, like cable and satellite, as cord cutters, but there are also “cord nevers,” or people who have never signed up for pay TV, and “cord shavers,” those who have cut some of the channels they received.

Dish has repeatedly declined to reveal the number of online-only subscribers for Sling TV, but most analysts believe it is still under 1 million.

Such numbers aren’t enough to “turn the pay TV market on its ear,” said Brett Sappington, senior director of research for Parks Associates.

Yet satellite and cable services have been struggling to retain subscribers. Last week, Dish Network reported that it lost a total of 281,000 customers in the second quarter, the biggest quarterly drop in the company’s history.

The report came despite other research that showed the cord-cutting rate has slowed. Cable TV’s subscriber losses have slowed in the past few years, according to ABI Research. The Leichtman Research Group said pay TV services added about 10,000 subscribers in the first quarter, led by Comcast’s gain of 53,000.

Dish’s earnings report showed the weakness in traditional satellite services, which will continue to struggle, said Joel Espelien, senior analyst for the research firm Diffusion Group.

Sling TV should be able to take advantage of that weakness, but has only been able to attract early tech adopters, he said. The majority of viewers are probably too confused by all of the online TV options, including Netflix, Amazon Prime and HBO Now, to pull the plug completely. Network and cable news channels also stream their coverage on their own websites, in addition to sometimes being part of packaged services like Sling TV and PlayStation Vue.

“People wanted an environment that has a lot of choices, but when you get that, you also get a very complicated world in which nothing can happen very quickly,” Espelien said.

Glitches in streaming services can also hamper growth. “@Sling how come whenever there’s something important to watch your steaming cuts out? Do better,” @MLR tweeted last week while trying to watch the Republican convention.

Others seem satisfied. “I cut the cord and still have live sports. Much cheaper with Sling TV,” Jennifer Lindsay tweeted.

Sling TV did not return a call requesting comment.

PlayStation Vue, initially available in only five test markets including the Bay Area, expanded to more than 200 markets across the country in March. Like Sling, it offers a package of popular channels starting at $30 a month. The service can now be watched on other Internet-connected devices besides the PlayStation home game console. And unlike Sling TV, Vue offers local sports channels like Comcast SportsNet Bay Area.

PlayStation spokeswoman Mary Taing said the company doesn’t share subscriber numbers, which are believed to be small. But she did say that 75 percent of them are ages 18 to 34, so “we are reaching a very digital savvy audience that is also coveted by networks and advertisers.”

One of them is Justin Sims, 28, of Portland, Ore., who hasn’t subscribed to cable in eight years while relying solely on Netflix and Hulu.

Before signing up for Vue, “I definitely got tired of missing live events, going to bars for sports or even occasionally downloading that show I couldn’t find for streaming,” he said in an email. “This has been a great alternative to a pricey cable package and is totally comparable to what they offer.”

Sappington of Parks Associates said Vue’s expansion to more cities should help it find more young customers. Also, he said, Sling TV’s numbers could grow because it now offers an option for subscribers to view three streams at a time instead of just one. That replicates what traditional pay TV subscribers can do now by watching different programs on different TVs in the same house.

“That’s really going to open up the market for mainstream use,” he said.

Sappington said he’s about to cut the cord in his own house to see what life is like on the streaming side. But he said it may be years before others can let go.

“There is a bit of an emotional leap that you have to make in order to go away from what you know to go to what you don’t know,” he said. “For most consumers, I don’t know if they’re ready to make that leap unless financially, they’re just forced to jump over the edge.”

The loss of a favorite TV network or show is not a trivial matter.

“If ‘Bob the Builder’ is not on at 8:30 in the morning, and your kid is having a meltdown and your wife has to deal with it, suddenly, you’re the most unpopular person in the home,” he said.